ABSTRACT
Return on investment, which you may also hear called accounting rate of return is a financial appraisal technique which tackles the problem that payback takes no account of income after the payback period. Return on investment looks at the overall income and expenditure over an entire project and is calculated as the:
average annual project net profit
average investment 100
How do you calculate the average investment. If a business purchased equipment for £8,000 with an expected four-year life and no projected scrap value at the end of its life, the average investment would be £8,000/4 = £2,000.
